Does institutional quality contribute to increasing labour productivity in sub-Saharan Africa? An empirical analysis.

Abstract

The objective of this work is to study the effect of institutional quality on labour productivity in sub-Saharan Africa. To do this, we considered a panel of 31 countries over the period from 1996 to 2016. Thus, we constructed an empirical model based on the stochastic frontier production function developed by Battese and Coelli (1995), to which we applied panel estimation techniques (static and dynamic), particularly with GMM system and Within estimators. Our results show that institutional quality indicators have a positive and significant influence on labour productivity. Political stability, government effectiveness and the rule of law are the indicators that contribute most to increasing labour productivity in sub-Saharan Africa. A series of robustness tests were performed to confirm our results. Thus, we suggest that African governments take a closer look at policies that promote good governance in their labour productivity growth strategies to improve the competitiveness of their economies